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  1. Stage One of the Crisis (2008 - 2009): News of Financial and Legal Irregularities on the Part of Lenders and Loan Servicers is Sporadically Reported

    Throughout 2008 and 2009, news was constantly percolating that mortgage lenders, and the companies whom they rely upon in their predatory practices, engaged in unseemly and unlawful conduct. Generally, articles of such misconduct were buried deep within the back pages of mainstream media, and the reports were short on details and gave little in the way of practical guidance to struggling borrowers. The articles made mention of several different types of misconduct, including:

    • The failure of lenders and loan servicing companies to lawfully document the assignment and/or transfer of loans;

    • The use of false affidavits and/or affidavits that were executed through "robo-signing", in attempts to circumvent the procedural and substantive rules required to lawfully effectuate a foreclosure;

    • The submission of documents that were never notarized and/or acknowledged, in violation of basic rules which require notarization;

    • The failure to provide legally-mandated notice to homeowners before and during foreclosure proceedings.

    Although the widespread extent to which lenders had defrauded the public was not yet apparent, it became increasingly clear that lenders had little, if any, regard for the welfare of the general public. For example lenders did not hesitate to institute foreclosures against homeowners whose livelihoods had been destroyed by the tragedies occurring on the Gulf Coast. From September 2009 to September 2010, foreclosure activity in Louisiana jumped by approximately 30%.

  2. Stage Two of the Crisis (November, 2009 - September 2009):

    Like most perpetrators of fraud, the lenders and their partners in crime (loan service companies and law firms that serve as foreclosure mills) relied on the fact that their victims (individual homeowners) were overwhelmed by the legal technicalities relating to mortgage loans and foreclosures, and thus unable to understand the true extent of the fraud that the banks had perpetrated nationwide.

    However, news of foreclosure irregularities spread like across the nation like a foul wind. Last week, attorneys general in all fifty states announced investigation into unlawful foreclosure practices. According the Forbes (, October 14, 2010), [t]he states' attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them."

    Furthermore, beginning in late 2009, and continuing to the present, increasing numbers of trial judges have dismissed lenders foreclosure actions based due to irregularities in documents and the lenders' failure to follow basic foreclosure procedures. Recently, even the law firms representing the banks have come under scrutiny, with some of the largest foreclosure mills in Florida subject to judicial inquiry. Some of the more recent decisions in favor of homeowners include:

    • In a decision reported by the New York Law Journal on July 7, 2010, Justice Mayer of New York's Supreme Court denied IndyMacBank FSB's request for an order of reference based on the bank's failure to prove that it actually possessed the note and mortgage at the time that the foreclosure action was filed. The court noted that the alleged endorsement presented to the court by the bank was on a separate page from the promissory note, and made no specific reference to the note. Similar decisions have been issued by courts in Florida and Ohio.

    • On October 9, 2009, the Attorney General of New Jersey announced that Wells Fargo had agreed to provide New Jersey consumer had agreed to pay $3.98 million dollars in connection with allegations that Wachovia, Golden West, and World Savings - which Wells Fargo had acquired - engaged in misleading and deceptive practices in marketing adjustable rate a/k/a/ "Pick-a-Pay" mortgages.

  3. Stage 3 of the Crisis: Protect Yourself and Save Your Home.

    In increasing numbers, homeowners and courts have taken the lenders to task for the financial improprieties and greed that has so devastated our nation. Like the rage and disgust that has emerged against fraudsters such as Madoff, the general public has come to realize that the banks have intentionally inflicted great harm upon the average citizen of this country. This profound realization has served as an epiphany for tens of thousands of homeowners, inspiring and empowering them to fight back against foreclosure.

    In record numbers, homeowners in judicial foreclosure states (such as New York, New Jersey, Florida, among others) have filed answers to foreclosure complaints and have aggressively questioned their lenders about their foreclosure practices and procedures. Increasingly, judges have become aware of the extent to which homeowners have been victimized, and have not hesitated to deny foreclosure judgments to banks. In many instances, foreclosure law firms have been forced to admit that lenders lack the documents required to obtain a judgment of foreclosure. In other instances, homeowners have successfully argued that their loans were the result of deception and fraud, particularly in matters involving adjustable rate loans.

    In non-judicial states (for example, California, Nevada, and others), homeowners began to file complaints and motions for temporary restraining orders, stopping foreclosure sales.

    Homeowners have also discovered that in this new environment, they do not necessarily need to hire expensive lawyers to protect their rights. Forms for answering foreclosure summons and complaints, and for obtaining temporary restraining orders to stop foreclosure sales, are available online at By fighting for their legal rights, American homeowners have been transformed, seemingly overnight, into a virtual army, which gives now hope for our nation.

    Marc A. Rapaport

    Marc A. Rapaport is an attorney with 18 years of experience handling state and federal court litigation. Mr. Rapaport has appeared throughout the national and local media, including CNN, NBC News, New York Magazine,,, and Harpers Magazine. is the leading supplier of foreclosure defense forms in the United States.

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